Analyst: Guo Mingyi Ming-Chi Kuo

We are looking at Apple's adoption of Mini LED industry trends and related investment opportunities. We divide the investment strategy of Apple Mini LED trend into five stages. The five investment stages are in order: first supplier (2019-2022), third supplier (2021-2023), MacBook supply chain (2021-2023), LED industry (2022-2024), and Micro LED (2023-2026). There are different priorities and investment opportunities in the five investment stages. We suggest that investment strategies with short-term, medium-term and short-term Apple Mini LED trends can be planned.

Phase I: supplier (2019, Muhammad, 2022)

Apple's Mini LED mass production plan "2019" began to become specific, so the first supplier has become the focus of the market. In the process that the supplier's stock responds to this profit, the change of yield and delivery schedule significantly affects the valuation of the supplier's stock. We believe that the investment value of this phase will gradually end in 2021-2022, because the equity parts of suppliers reflect this profit, and new competitors will begin to emerge in 2021. However, the advantage of the supplier lies in the early establishment of the ability to design and produce Mini LED-related components, and we recommend investing in the advantage of focusing on whether the supplier is good enough to obtain more non-Apple orders to maintain growth.

Phase I: supplier II (2021 Mustang 2023)

In order to decentralize the supply of insurance and reduce costs, Apple is actively looking for suppliers of key components of Mini LED. We believe that the first supplier is the new focus of the market at this stage, and we expect this stage to last until 2023. The "supplier" part of the key components of Mini LED is a Chinese manufacturer, which has a significant cost advantage, so if the yield meets the requirements of Apple, the proportion of shipments will be significant. We believe that the proportion of orders and delivery schedule of the first supplier will be the focus of the market.

The third stage: MacBook supply chain (2021 Mel 2023)

We believe that Mini LED board shipments are mainly driven by MacBook, not iPad. MacBook shipments have not been "too significant" in the past few years. However, benefiting from the adoption of Mini LED boards, Apple Silicon and new designs, we estimate that MacBook shipments will be significantly higher than 20% YoY in 2021 and 2022. Benefiting from the rapid success of MacBook shipments driven by Mini LED, we expect the MacBook supply chain to become a market concern again. In the supply chain, we pay special attention to suppliers of new specifications, new entrants, significant market share gains and beneficiaries of specification upgrades. We believe that this stage will last until 2023.

The fourth stage: LED industry (2022 Mel 2024)

We believe that if MacBook and iPad get more positive feedback from the market due to the adoption of "Mini LED", more non-Apple companies will emulate the strategy of Apple purchasing and promoting Mini LED, which will consume the capacity of LED. If the profitability of LED chip capacity can be significantly improved, there will be many investment opportunities in the LED industry. At this stage, the non-Apple supply chain will become the focus of the market.

Phase 5: Micro LED (2023 Murray 2026)

We predict that the production cost of Micro LED will improve significantly in 2023 and 2024, so it is likely to become the focus of market attention from 2023. We believe that Apple is developing Micro LED technology, but the "pre -" delivery schedule has not yet been determined. We also believe that if the Mini LED industry is successful, it will help more businessmen to invest in Micro LED design and R & D and help to achieve Micro LED mass production. At this stage, we predict that investment opportunities will come from LED chip suppliers, mass transfer suppliers, package suppliers, testing suppliers and equipment suppliers.

Investment advice:

We divide the investment strategy of Apple Mini LED trend into five stages and suggest that we can plan the short-term, medium-term and short-term Apple Mini LED trend investment strategy.

Insurance advice:

The production of new products is delayed or the market demand is not as expected.

We are taking a positive view of the industry trend and investment opportunities related to Apple's adoption of Mini LED. Therefore, we divide the investment strategy for Apple's Mini LED trend into five stages (see Figure 1). The five investment stages are a first supplier (2019mur2022), second supplier (2021mur2023), MacBook supply chain (2021mur2023), LED industry (2022mur2024), and Micro LED (2023mur2026). The five investment stages have different focus areas and investment opportunities. Therefore, we recommend that investors refer to it and plan short, medium, and long-term investment strategies for Apple Mini LED trends.

The first stage: First Supplier (2019 Mel 2022)

As Apple's Mini LED mass production plans became concrete starting in 2019, the first supplier becomes the focus of market attention. As first-supplier stocks react to this positive trend, changes in production yields and shipment schedules significantly affect the valuation of supplier stocks. We believe that the investment value at this stage will gradually end in 2021-2022, as supplier stocks largely reflect the positive and new competitors emerging in 2021. However, the first supplier has the advantage of building up its ability to design and produce Mini LED-related components earlier. We recommend that investors pay attention to whether the first supplier can leverage this advantage to secure more non-Apple orders to sustain growth.

The second stage: Second Supplier (2021 Mel 2023)

To diversify supply risk and reduce cost, Apple is actively looking for second suppliers of key Mini LED components. We believe that second suppliers are the new focus of the market in this stage and expect it to continue through 2023. We believe that the proportion of orders and shipment schedules of the second supplier will be the market focus.

The third stage: MacBook Supply Chain (2021 Mel 2023)

We believe that MacBooks, not iPads, mainly drive Mini LED panel shipments. MacBook shipments have not grown much in the past few years. However, we expect MacBook shipments to grow significantly by 20% YoY, or more in 2021 and 2022, due to the adoption of Mini LED panels, Apple Silicon, and all-new designs. As Apple benefits from the rapid growth of MacBook shipments driven by Mini LED, we predict that the MacBook supply chain will become a renewed market focus. We are particularly optimistic about suppliers for new specifications, new entrants, significant market share gainers, and specification upgrade beneficiaries within the supply chain. We believe this stage will last until 2023.

The fourth stage: LED Industry (2022mur2024)

We think that if the MacBook and iPad receive more positive feedback from the market for adopting Mini LED panels, more non-Apple companies will follow Apple's strategy of adopting and promoting Mini LEDs, which will consume a lot of LED chip capacity. If the LED chip capacity utilization rate can be significantly improved, there will be many investment opportunities in the LED industry. At this stage, the non-Apple supply chain will become the market focus.

The fifth stage: Micro LED (2023mur2026)

We predict that the production cost of Micro LED will improve significantly starting in 2023 onwards 2024, so it will likely be a market focus from 2023. We believe Apple is developing Micro LED technology, but the production schedule is not yet confirmed. We also think that if the Mini LED is successful, it will help more companies invest in Micro LED design and rotated and help to realize Micro LED mass production. At this stage, we expect investment opportunities to come from LED chip suppliers, mass transfer suppliers, packaging suppliers, testing suppliers, and equipment manufacturers.

Stock for actions:

We divide the investment strategy for Apple's Mini LED trend into five stages and recommend that investors refer to it and plan short, medium, and long-term investment strategies for Apple Mini LED trends.

Risk:

New product shipment delays; lower-than-expected demand due to COVID-19.